Economic complexity: conceptual grounding of a new metrics for global competitiveness
A new non-monetary metric captures diversification, a dominant effect on the globalised market, and the effective complexity of products.
The availability of data corresponding to the products exported by all countries provides an excellent dataset to test economic ideas and extracts new information about the process of economic development. The matrix of countries and exported products shows a marked triangular structure instead of the block-diagonal structure expected from Ricardian arguments of specialization. This observation points to the fact that diversification is instead the dominant effect in the globalized market. We discuss how to define a suitable non-monetary metrics for the value of diversification and the effective complexity of products. We discuss in detail the previous proposed approaches to assess this challenge and their limitations. We introduce a new approach to the definition of these metrics which seems to overcome the previous problems and we test it in a series of model systems.
More in Economic complexity
A new algorithm unveils complicated structures in the bipartite mapping between countries and products of the international trade network.
Coupled non-linear maps extract information about the competitiveness of countries to the complexity of their products from trade data.
Less developed countries have to learn simple capabilities in order to start a stable industrialization and development process.
Dynamical systems theory predicts the growth potential of countries with heterogeneous patterns of evolution where regression methods fail.
Network theory finds unexpected interactions between the number of products a country produces and the number of countries producing each product.
A quantitative assessment of the non-monetary advantage of diversification represents a country’s hidden potential for development and growth.